Airlines Exploited The Heck Out Of Passengers Trying To Escape The Storm

Robert Reich is one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.

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Leaving New York City yesterday bound for California on one of the last flights out of JFK before the airport closed, a flight attendant told me I was lucky to already have my ticket. In light of the pending hurricane, the airlines had just hours before jacking up ticket prices on the flight to $4,000 (I had paid a few hundred dollars when I bought it last week).

As a result of the last-minute rush for tickets, the flight was oversold by 47 passengers. So the flight attendants offered money to any passengers who volunteered to switch their tickets to the next flight out of NYC, whenever that might be. The first offer of $200 wasn’t enough to elicit 47 volunteers, nor were the subsequent ones of $300 and $350. An offer of $400 finally did the trick.

Assuming that the 47 extra passengers had each paid $4,000 to get onto the plane at the last minute, and the 47 who gave up their seats for them received $400 in return, the trade would have been “rational” in narrow market terms. After all, the seats were “worth” $4,000 to those who bought them at the last minute, and switching to the next flight (whenever that might be) was “worth” $400 to those who agreed to do so.

But the transaction was also deeply exploitative. The airline netted a huge profit because of the impending storm.

I couldn’t help think this was a miniature version of the America we’ll have if Mitt Romney is elected president. Rational and efficient in terms of supply and demand, guaranteed to maximize profits, but fundamentally unfair.